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On Monday, the Supreme Court issued a notice on the Special Leave Petition filed by Mahyco Monsanto Biotech(India) Ltd(MMB) against a judgment of the Delhi High Court. The said judgment upheld the investigation initiated by the Competition Commission of India (CCI) against the directors and key officials of the company for contravention of anti-trust laws. MMB, a joint venture of Mahyco and Monsanto Holdings Pvt Ltd, is in the production and supply of Bt cotton seed. The SC bench headed by Justices S A Bobde and Deepak Gupta issued a notice to CCI, and Nuziveedu Seeds, a local seed producer which was the informant before the fair market regulator. Prima facie, the CCI discovered that the biotech company is charging exorbitant prices on its local Bt cotton seeds licensees and ordered a probe by Director General (DG) sensing an abuse of its dominant position.
During the investigation, the DG issued notices both to the directors and officials. This was disputed by the company in the Delhi High Court. They contended that the notices to company directors can only be issued after verifying that the company has violated the provisions of the Competition Act. It is further contended that the penalty under Section 27(b) can be imposed only on the company, and not on 'individuals', as the penalty or sanction is based on 'turnover'. The punishments under Section 48 can only be imposed in the case of a violation of the CCI orders and not for the violation of Sections 3 and 4 of the Competition Act. As per the judgment delivered on October 12, the Single Bench of Justice Vibhu Bakhru discarded the arguments. On December 12, 2018, on an appeal to the Division Bench by the company, the Division Bench comprising of Chief Justice Rajendra Menon and Justice V Kameswar Rao, upheld the single judge's judgment.
The High Court followed the decision of an earlier judgment in the case of Cadila Healthcare and held that the directors can be proceeded along with the defaulting company for imposing penalty and punishment. The Court said that the Officers / Directors can only be held liable if the CCI concludes that they were key persons who were In-charge and responsible for the conduct of the Company's business. Regarding the contention that penalty under Section 27 was applicable only to the 'enterprise', the Court considered that the provision also used the word 'persons' along with 'enterprise'. The Division Bench judgment authored by Justice V K Rao held that the term 'turnover' was interpreted as an annual income of the directors or officers from the firm, because there cannot be an income of a director/officer from an infringing product.
The High Court also rejected the argument that Section 48 is only attracted in case of violation of the CCI orders, since the Section states "on contravention of the provisions of the Act".
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